The House of Commons debated, yesterday, the Eurozone Financial Assistance. During the debate. Bill Cash made the following interventions:
Mark Reckless (Rochester and Strood) (Con): I beg to move, That this House notes with concern that UK taxpayers are potentially being made liable for bail-outs of Eurozone countries when the UK opted to remain outside the Euro and, despite agreement in May 2010 that the EU-wide European Financial Stability Mechanism (EFSM) of €60 billion would represent only 12 per cent. of the non-IMF contribution with the remaining €440 billion being borne by the Eurozone through the European Financial Stability Facility (EFSF), that the EFSM for which the UK may be held liable is in fact being drawn upon to the same or a greater extent than the EFSF; further notes that the European Scrutiny Committee has stated its view that the EFSM is legally unsound; and requires the Government to place the EFSM on the agenda of the next meeting of the Council of Ministers or the European Council and to vote against continued use of the EFSM unless a Eurozone-only arrangement which relieves the UK of liability under the EFSM has by then been agreed.
I thank the Backbench Business Committee for facilitating this debate.
Ever since the civil war, and perhaps back to the Plantagenet era, the primary duty of this House has been to control supply, to hold the purse strings and to decide what the Executive may or may not spend on behalf of our constituents. It is not for Her Majesty’s Treasury to decide what unknowable liabilities to sign our constituents up for. It is for us, as their elected representatives, to make that decision. I ask every Member to consider that point when they cast their vote later. It is our decision, and only we stand between our constituents and the ability of others to spend their money on their behalf.
My simple point is that it is unaffordable for this country to bail out countries that joined a currency that we chose not to join, when we ourselves are borrowing as much money as, if not more than, those very countries. We are seeing £12.5 billion of our constituents’ money—twice as much as was saved in the whole first year of the coalition Government, and £500 a household—being spent on bail-outs; and I mean “spent”, because although the Government tell us that they expect the money to be paid back, if that is so, why will the private sector not lend? Why are there rates of 10% to 17%? … Mark Reckless: The hon. Gentleman is quite correct, and it goes on and on. Yet it is not our problem, and it is not our currency. If we can do anything, we can save ourselves and perhaps Ireland, but we cannot save the euro. The eurozone countries made their decision. We advised them against it, yet they chose to create a currency without a fiscal union to back it up. It is their problem, not ours.
Mr William Cash (Stone) (Con): Does my hon. Friend recall that Madame Lagarde herself, the prospective head of the International Monetary Fund, said on 17 December last year on that very point: “We violated all the rules because we wanted to close ranks and really rescue the euro zone”?
She was being very clear and telling the truth.
Mark Reckless: My hon. Friend the Member for Stone (Mr Cash) is quite right.I hear that that lady is a good friend of the Chancellor, but I do not believe that we should put the debtors in charge of the bank. The IMF money, too, or 5% or so of it, is our constituents’ and taxpayers’ money. We should have an emerging market candidate to run the fund, and we should not allow the eurozone to continue to perpetuate a French-led IMF that nods through bail-outs with no restructuring and no devaluation. The markets know, and all of us know in our hearts, that bail-outs will not work.
The eurozone says that there will be a “soft restructuring”. In other words, when Greece, Portugal, Ireland or—who knows?—Spain cannot pay back what it has promised, the eurozone will say, “Oh, don’t worry about it, we’ll just roll it over.” In the City, they call that an extend-and-pretend policy. Such a policy was pursued in Japan for the whole of the 1990s, which then lost two decades of growth instead of dealing with the banks and recognising its insolvency. The European Central Bank should avoid that. Unless and until the ECB deals with that problem and understands that the assets that it has taken supposedly to back the loans are worth far short of what it currently assumes, the banks will not lend, because they do not to whom it is safe to lend. The ECB should write those assets down and have that reckoning. The extend-and-pretend policy—the patching up and bailing out, and the throwing of good money after bad—is destined to fail.
Why are we supporting a currency that we very wisely did not join, after warning exactly what would happen? I ask Members of this House to stand up for their constituents. We should require—yes, require—the Treasury to vote against the use of the bail-out mechanism. If the EU does not agree to that, we should require the Treasury to use our veto over the permanent bail-out mechanism until we are extracted and removed from all liability. We should never have been liable for that mechanism. We know that it is unlawful and that that is not for our currency.
It is right that we stand up for our taxpayers and our constituents, who look to us as Members of this House to do so. They do not look to us to seek permission from those on the Treasury Bench, or to urge them to do something rather than require them to do something. Surely as Members of the House we are more than that. Surely our country is more than a star on somebody else’s flag. I urge all hon. Members to vote no to the Government-sponsored amendment.
Mr Cash: Will my hon. Friend consider the answer I received from Ministers this morning, and reflect that although the Chancellor opposed the mechanism, the Government had every reason then to challenge it in the European Court? Why did they not do so?
Mr William Cash (Stone) (Con): The Government amendment—they have not tabled it in their own name, but that is what it is, to a great extent—reflects badly on the integrity of the coalition. It has nothing whatever to do with the national interest. It also says a great deal about a commitment to Liberal Democrat ideology, and it is primarily about numbers. The Liberal Democrats, and certain elements in the Conservative party at a very high level, are quite prepared to allow further European integration. There are alternatives that would allow us to renegotiate the treaties and/or to say no, but they are simply not doing so.
Indeed, only a few days ago, the Prime Minister made it abundantly clear that the object of the coalition was to stabilise the economy. We understand that. The problem is that this is about numbers, not about principles or policy. There are many people in the Conservative party, outside and inside the House, who know that the arguments we are seeking to address in a reasonable fashion are in the interests of the country. There is no question about that; the press outside believe it as well. The bottom line is that those of us who have relentlessly pursued the issue of the eurozone bail-out and have tabled many questions have invariably received what could reasonably be described as somewhat evasive answers.
Why should the British taxpayer or British hospitals and schools in our constituencies in any way underwrite what goes on in Portugal, or indeed any other country in the eurozone, particularly in times of austerity? It is nothing to do with the question, as suggested on a number of occasions, of qualified majority voting. This is completely contrary to the assertion made in reply to me today by the Financial Secretary. Article 122 is not compatible with the treaty and cannot possibly be used to support the European financial stability mechanism. Indeed, in their acquiescence, as shown in the amendment, the Government accept that the position is legally unsound. By saying that, they completely undermine their position. The Government know it and everyone knows it: it is not compatible with the treaty, and the Minister is wrong.
Mr John Redwood (Wokingham) (Con): My hon. Friend makes a powerful legal point. Does he agree that what these states in trouble need is a work-out, not a bail-out? We do not give alcoholics more drink; we cure the alcoholism. We should not give the over-borrower more borrowing.
Mr Cash: I could not agree more, and a course of Alcoholics Anonymous would not be out of place.
It is not just the European Scrutiny Committee that said the position was legally unsound or unlawful. Madam Lagarde herself, the prospective head of the IMF, said on this issue on 17 December: “We violated all the rules because we wanted to close ranks and really rescue the eurozone.”
This is a stitch-up of the British people to maintain the so-called solidarity for further integration of a failing European project. That is what lies at the heart of the matter.
Why are people protesting and rioting all over Europe —in Madrid, Greece, Italy and the list is growing? What is not growing is the European economy and the reason is that the sort of policies needed—here and in all the other countries—to engender growth to deal with the deficit that the Government rightly say we have to address are impossible to achieve without generating the growth that is needed by repealing legislative burdens and generating policies that the integrationists in Europe simply refuse to allow. I would go further and say that the coalition in this country cannot achieve growth simply because the Liberal Democrats, as part of the coalition, have silenced the Prime Minister’s promise to repatriate burdens on business. It is called 56 votes and the keys to No. 10.
Jim Sheridan (Paisley and Renfrewshire North) (Lab): The hon. Gentleman might have heard, as I did, the Liberal part of the coalition talking clearly about what might happen “if” these loans are repaid, which suggests some ambiguity and concern within the coalition Government about whether the loans will be repaid. He will also recall that when the Conservatives were in opposition, they opposed the bail-out of Northern Rock. What has changed between then and now?
Mr Cash: Very simply, we now have a new coalition Government who have been seeking to achieve a reduction in the deficit, but they are not doing the accompanying things that are required in respect of the failing European project. That is the key problem. There are young people throughout Europe—and, for that matter, in this country—who simply cannot get jobs because companies will not take them on as a result of European employment regulations and because the deficit in the public sector cannot be stabilised without reasonable tax revenues from the small business community, which is being deliberately destroyed by the refusal to repeal the burdens that strangle it.
In the meantime, Germany has had unit labour costs of a mere 2% on average over the last 10 years, whereas the average for the rest of the European member states is between 25% and 30%. It is an impossible situation, making it impossible for Europe—this entity that the integrationists believe in—to be able to compete with the BRIC countries. Germany invests in cheaper labour markets in Europe, with 67% of all its trade being with Europe, while 45% of all European trade with China is German.
The reality is that what we are debating today is symptomatic of a failure in the coalition Government’s strategy. We are not going to get out of this problem—I say this in all sincerity and in the great hope that people will listen at last—as long as we go on with this failing project. We will not get out of the mess. Today’s debate is an opportunity to get the issue straight. As Michael Stürmer, the chief correspondent of Die Welt argued, the dream is over and the Maastricht treaty has to be revised, but the coalition has no will to do so. The European bail-out of Portugal is a symptom of this deeper problem.
Claire Perry (Devizes) (Con): Given my hon. Friend’s very pessimistic view of the outlook for the eurozone, which many of us share, does he not feel like giving just a tiny cheer that, thanks to the Chancellor’s efforts last December, we will take no further part in a permanent bail-out mechanism for Europe?
Mr Cash: I did not say anything adverse about it at the time other than that the opportunity was not taken, despite advice I tried to give, to use the treaty opportunity to say to other member states that we would not agree to the treaty and would veto it unless we were taken out of the EFSM; we could then have brought forward the arrangements currently proposed for 2013. That proposition was eminently reasonable, eminently possible and €440 billion was available under the facility, which is in operation until 2013. In other words, the whole EFSM issue pivots on vanity and a determination not to unravel something that cries out for unravelling. It is not just; it is not right; it is completely irrational.
There are going to be further and deeper riots and protests. Worse still, I believe that the Government are contributing towards instability throughout Europe while claiming that within the time frame extending to 2013, bailing out the German and French banks—we should remember that that is what lies at the root of the problem—as well as Portugal and Greece will achieve stability. It will not. The argument is not only wrong, but totally—
Mr Cash: I do not want to interrupt my hon. Friend’s flow, but it was open to the Government to challenge the issue before the European Court and they did not do so. It was open to them to say that they would veto the treaty unless we had an unravelling of the EFSM, but they chose not to do so. They went for integration, not for dealing with the situation.
Mr Cash: Does the shadow Minister accept that the date on which that particular statement was made, 15 July 2010, was four days after the expiry of the date on which a challenge to the European Court could have been made? Furthermore, does he accept that since then the Government have insisted that they oppose the proposal of the former Chancellor of the Exchequer?
Chris Leslie: That is an extremely illuminating fact and it would be perfectly legitimate for Members on the Government side, perhaps in private meetings elsewhere, to ask a few more searching questions about what exactly their Front Benchers have been doing in their name. Either the Minister who signed the memorandum was wrong—perhaps she was misled in her understanding or she and her officials were ignorant of the facts—or perhaps she was actually speaking the truth but was subsequently slapped down by the Chancellor.
Mr Cash: On the Minister’s own terms, it is absolutely clear that the Chancellor of the Exchequer was against those arrangements, so why in that two-month period did the Government not challenge them in the European Court of Justice?
Mr Hoban: My hon. Friend and his Committee have a particular view on the legality of the arrangements, but as I have said there was a clear view that article 122 could be used in those circumstances.
Although we have had to live with the decisions of the past and the EFSM, we have fought to free our nation from the constraints of those decisions in the future. We will not have to contribute towards a European rescue of another euro area member state once the permanent ESM comes into force.
I believe that the amendment tabled by my hon. Friend the Member for Daventry (Chris Heaton-Harris) captures the essence of our position. As a consequence of the action taken by the previous Government, we are part of the EFSM. This Government have had to ensure that we are outside the scope of the permanent mechanism. My right hon. Friend the Prime Minister has already delivered that commitment at the European Council in December. I hope that my hon. Friends recognise that the action we have taken has freed the UK from the obligation to take part in future bail-outs of euro area member states.
Mark Reckless: So the Treasury agrees that this is unlawful, but it is not going to do anything about it.
In the debate, it was suggested that these bail-outs were a rounding error. My constituents do not believe that £500 per household is a rounding error. It was also suggested that perhaps these moneys are going to be paid back and there will not be defaults. Well, if Members believe that, why do they not invest their own money rather than that of their constituents? My hon. Friend the Member for South Northamptonshire (Andrea Leadsom) said that it would be possible to get a return of 50% or 100%. Does not that suggest that we will not be getting our money back?
Today Members face a choice. If they believe that it is sufficient to urge the Government to raise the issue, then vote yes to the amendment regrettably tabled by my hon. Friend the Member for Daventry (Chris Heaton-Harris). If they believe that we need to put a stop to these bail-outs and say, “Enough is enough, it is our money, we did not join your currency, and we want our money back”, then vote no to the amendment. I am disappointed to hear that Opposition Members will not be joining us in the Lobby on this occasion. The hon. Member for Nottingham East (Chris Leslie) put his position honourably; perhaps one day he will have a leader who will lead. For now, however, the position is that these bail-outs continue and our constituents’ money is being thrown away—good money after bad. This is an opportunity for Members of this House to stand up, to look our constituents in the eye, and to say that we voted no to the bail-outs. Please vote no to the amendment.
Question put, That the amendment be made.
The House divided: Ayes 267, Noes 46.